2013 (6) TMI 442 - AT - Central Excise

Cenvat Credit - Penalty - Input services received prior to 10.09.2004 - Scope of Rule 15 of CCR - Held that - strong force in the contentions raised by the appellant that division Bench of the Tribunal in the case of Balrampur Chini Mills Ltd (2012 (12) TMI 532 - CESTAT, NEW DELHI), will also apply in this case. It can be seen that provisions of sub-rule (2) can be brought into picture only where Cenvat credit, of duty on inputs or capital goods is availed on account of fraud, willful misstatement. Provisions of sub-rule (3) can be brought into play for denial of CENVAT credit of input services and penalty can be imposed as indicated therein prior to amendment. It is seen that provisions of Section 11AC of Central Excise Act or Rule 15(2) could not be invoked, as the issue was of credit on input services. At the most, for the violations of availing ineligible credit, the appellant can be penalized under the provisions of Section 15(3) for an amount of Rs. 2000/- only. The provisions of Rule 15(4) cannot be invoked in this case as it is undisputed that the appellant is a manufacturer and not provider of output services. - Maximum penalty imposed equal to Rs. 2000/-.

Summary

Issues:
1. Wrong availment of CENVAT credit of service tax paid by the appellant.
2. Imposition of penalty under Rule 15(2) of CENVAT Credit Rules, 2004.

Analysis:
1. The appellant, engaged in manufacturing Neutral Glass Tubing, availed CENVAT credit of service tax for services received before 10.09.2004, which was deemed inadmissible. The appellant reversed the credit and paid interest but faced a show cause notice for recovery. The adjudicating authority confirmed the demand, interest, and imposed a penalty under Rule 15(2) of CENVAT Credit Rules, 2004. The first appellate authority upheld this decision.

2. The appellant challenged only the penalty imposed, arguing that Rule 15(3) should apply instead of Rule 15(2). The issue centered on the penalty for wrong availment of CENVAT credit on input services. The Tribunal analyzed the relevant rules and previous decisions, noting that Rule 15(2) applies to fraud or willful misstatement related to duty on inputs or capital goods. The Tribunal found that Rule 15(3) should be invoked for the violation in question, limiting the penalty to Rs. 2,000. Citing precedents like Davangere Sugar Company and Balrampur Chini Mills Ltd, the Tribunal set aside the penalty under Rule 15(2) and directed payment of Rs. 2,000 within 30 days.

3. The Tribunal's decision emphasized that penalties should align with the specific provisions of the CENVAT Credit Rules, 2004. By applying Rule 15(3) instead of Rule 15(2), the Tribunal clarified the appropriate penalty amount for the appellant's violation. The judgment highlighted the importance of legal interpretation and adherence to statutory provisions in determining penalties for CENVAT credit infractions.